1. Available Credit To Debt - this is where all the debt you have is going to be looked at. It will include any: credit cards, car loans, student loans, personal loans… It also is going to look at your available credit, this is money that you have available to borrow but are not using. For example, available money to spend on your credit card would be available credit.
This factor weighs roughly 30% in your total score calculation. To improve this you should strive to show more available credit. Many individuals have large sums of debt and this won't be looked at quite as much as your available credit. By showing money that you have available to borrow, you are showing that you are in a secure financial position. If not your credit cards would all be maxed out.
2. Payment History - this is the most important factor in your FICO rating and is roughly 40% of your overall score. This is where all the negative items on your credit report are counted and all the positive items. It is important to build positive marks if your working to fix your credit score however if you continue to have negative items it will be very difficult to obtain a good score.
The negative items are what is damaging your score and must be removed. You can remove these by filing a dispute with the credit bureaus, you may also be able to settle with a debt collector and in exchange have them stop reporting the item to the bureaus.
3. Credit Inquiries - this is the number of times your credit gets checked. If you have an exorbitant number of credit inquiries then it is going to appear that you're trying to finance a lot of purchases. Try to limit the frequency in which your credit gets checked, the bureaus do realize that it will be checked a number of times just in the course of everyday life. This is going to be roughly 10% of your FICO score.
4. Length Of Accounts - this is going to examine how long you've been using credit and how old each individual account is. It also is about 10% of your score and you should try to keep long open good relationships with your lenders.
5. Types Of Accounts - the idea behind this is the more diverse accounts you have or different accounts the better risk for a lender you will be. This is only 10% of years overall score and we wouldn't suggest you to worry much about improving this area.
Instead focus your efforts on your payment history and available credit to debt ratio. These two pieces of information are almost 70% of your entire score and if you can show responsibility in these areas then you're almost guaranteed a good credit score.
You don't just have to live with bad credit, your federal government has giving you the right to remove negative marks from your credit report. Removing bad credit items from your history has been shown to be the most effective method to getting better credit.
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Article Added on Sunday, March 4, 2012
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